<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 1, 1997
------------
CROSS-CONTINENT AUTO RETAILERS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
333-06585 75-2653095
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(Commission File Number) (I.R.S. Employer Identification No.)
1201 South Taylor Street, Amarillo, TX 79101
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(Address of Principal Executive Offices) (Zip Code)
(806) 374-8653
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Registrant's telephone number, including area code
Not Applicable
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(Former name or address, if changed since last report)
-1-
<PAGE>
On July 1, 1997, Cross-Continent Auto Retailers, Inc. ("C-CAR"), acquired
100% of the common stock of Sahara Nissan, Inc. On July 15, 1997, C-CAR
filed a current report on Form 8-K (the "Original 8-K") disclosing such
acquisition.
This Amendment No. 1 to the Original 8-K is being filed for the purpose of
filing the financial statements and pro forma financial information required
to be disclosed under Item 7.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
Combined Balance Sheet as of March 31, 1997 and December 31, 1996 and
Combined Statements of Income, of Changes in Stockholders' Equity and
of Cash Flow for the year ended December 31, 1996 and three months
ended March 31, 1997 and 1996, with footnotes thereto.
(b) Pro Forma Financial Information
(1) Pro Forma Financial Information prepared in connection with the
acquisition of Sahara Nissan, Inc.
Pro Forma Condensed Consolidated Statements of Operations for
(i) the twelve months ended December 31, 1996, and (ii) the
three months ended March 31, 1997, and Pro Forma Condensed
Consolidate Balance Sheet as of March 31, 1997, with footnotes
thereto.
(2) Pro Forma Financial Information prepared in connection with
the acquisition of Douglas Toyota, Inc. and Toyota West
Sales and Service, Inc. as previously filed in June 1997.
Pro Forma Condensed Consolidated Statements of Operations for
(i) the twelve months ended December 31, 1996, and (ii) the
three months ended March 31, 1997, and Pro Forma Condensed
Consolidate Balance Sheet as of March 31, 1997, with footnotes
thereto.
(c) Exhibits: Filed with Original 8-K on July 15, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CROSS-CONTINENT AUTO RETAILERS, INC.
DATE: August 12, 1997
By: /s/ James F. Purser
-----------------------------------
James F. Purser
Chief Financial Officer
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Cross-Continent Auto Retailers, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Sahara
Nissan Inc. at December 31, 1996 and the results of their operations and their
cash flows for the year ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Fort Worth, Texas
April 30, 1997
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<PAGE>
SAHARA NISSAN, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
- -------------------------------------------------------------------------------
March 31, December 31,
1997 1996
--------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 618 $ 1
Accounts receivable 2,009 3,075
Inventories 9,223 7,037
Prepaid assets 11 -
------- -------
Total current assets 11,861 10,113
Property and equipment, net 1,615 1,672
Other assets 21 21
------- -------
$13,497 $11,806
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Floor plan notes payable $ 7,638 $ 5,534
Accounts payable 281 378
Accrued expenses 873 582
Notes payable to affiliates 3,625 3,390
------- -------
Total current liabilities 12,417 9,884
------- -------
Capital lease debt 1,232 1,236
Deferred warranty revenue 367 375
------- -------
Total long-term liabilities 1,599 1,611
------- -------
Stockholders' equity (deficit):
Common stock, no par value,
2,500 shares authorized,
750 shares issued and outstanding 150 150
Retained earnings (deficit) (669) 161
------- -------
(519) 311
------- -------
Commitments and contingencies (Notes 9 and 10) $13,497 $11,806
------- -------
------- -------
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
SAHARA NISSAN, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, Year Ended
-------------------- December 31,
1997 1996 1996
------ ------ ------------
(unaudited)
Revenues:
Vehicle sales $13,656 $10,164 $56,756
Other operating revenue 1,747 1,607 6,980
------- ------- -------
Total revenues 15,403 11,771 63,736
Cost of sales 13,039 9,740 53,904
------- ------- -------
Gross profit 2,364 2,031 9,832
------- ------- -------
Expenses:
Selling, general and administrative
expenses 1,714 1,375 6,246
Depreciation and amortization 35 31 151
------- ------- -------
1,749 1,406 6,397
------- ------- -------
Income before interest 615 625 3,435
Interest expense on notes
payable to affiliates (82) (79) (314)
Other interest expense (206) (106) (591)
------- ------- -------
Net income $ 327 $ 440 $ 2,530
------- ------- -------
------- ------- -------
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
SAHARA NISSAN, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, Year Ended
----------------- December 31,
1997 1996 1996
-------- ------- ------------
Cash flows from operating activities:
Net income $ 327 $ 440 $ 2,530
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 35 31 151
(Increase) decrease in:
Accounts receivable 1,066 (1,319) (1,493)
Inventory (2,186) (319) (1,602)
Prepaid and other assets 10 (1) (6)
Increase (decrease) in:
Accounts payable (98) (129) 57
Accrued and other liabilities 284 224 108
------- ------- -------
Net cash used in operating activities (562) (1,073) (255)
------- ------- -------
Cash flows used in investing activities:
Purchase of property and equipment - - (89)
------- ------- -------
Cash flows from financing activities:
Change in floor plan notes payable 2,103 1,376 2,660
Change in notes payable to affiliates 235 325 170
Distributions to stockholders (1,157) (626) (2,477)
Principal payments on capital lease debt (2) (2) (9)
------- ------- -------
Net cash provided by financing activities 1,179 1,073 344
------- ------- -------
Increase in cash 617 - -
Cash at beginning of period 1 1 1
------- ------- -------
Cash at end of period $ 618 $ 1 $ 1
------- ------- -------
------- ------- -------
Supplemental cash flow information:
Cash paid for interest $ 262 $ 205 $ 887
------- ------- -------
------- ------- -------
The accompanying notes are an integral
part of these financial statements.
-7-
<PAGE>
SAHARA NISSAN, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
- -------------------------------------------------------------------------------
Common Stock Retained
--------------- Earnings
Shares Amount (Deficit) Total
------ ------ --------- -----
Balance at December 31, 1995 750 $150 $ 108 $ 258
Net income - 2,530 2,530
Distributions to stockholders - (2,477) (2,477)
--- ---- ------- -------
Balance at December 31, 1996 750 150 161 311
Net income (unaudited) - 327 327
Distributions to stockholders
(unaudited) - (1,157) (1,157)
--- ---- ------- -------
Balance at March 31, 1997
(unaudited) 750 $150 $ (669) $ (519)
--- ---- ------- -------
--- ---- ------- -------
The accompanying notes are an integral
part of these financial statements.
-8-
<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS OPERATIONS - Sahara Nissan, Inc. ("Sahara Nissan" or the "Company")
sells new and used automobiles under the name "Sahara Nissan" through a dealer
agreement with Nissan Motor Corporation U.S.A. In addition, the Company retails
and wholesales replacement parts and provides vehicle servicing in the Las
Vegas, Nevada area.
UNAUDITED INTERIM PERIODS - The following notes, insofar as they are applicable
to March 31, 1997 and the three-month periods ended March 31, 1996 and 1997, are
unaudited. These interim financial statements have been prepared on the same
basis as the annual financial statements included herewith. In the opinion of
management, all adjustments, consisting only of ordinary recurring accruals
considered necessary to fairly state the unaudited financial position at March
31, 1997 and the unaudited results of operations and cash flows for the three
months ended March 31, 1997 and 1996 have been included. Results for the three
months ended March 31, 1997 and 1996 are not necessarily indicative of results
which may be expected for any other interim period or for any year as a whole.
MAJOR SUPPLIER - Sahara Nissan purchases substantially all of its new vehicles
and parts inventory from Nissan Motor Corporation U.S.A. ("Nissan") at the
prevailing prices charged by the automobile manufacturer/distributor.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand and
all highly liquid investments with maturities of three months or less when
purchased.
REVENUES - Revenues from vehicle and parts sales and from service operations are
recognized at the time the vehicle is delivered to the customer or service is
completed.
FINANCE FEES AND INSURANCE COMMISSIONS - Finance fees represent revenue earned
on notes placed with financial institutions in connection with customer vehicle
financing. Finance fees are recognized in income upon acceptance of credit by
the financial institution. Insurance income represents commissions earned on
credit life, accident and disability insurance sold in connection with vehicles
on behalf of third-party insurance companies. Insurance commissions are
recognized in income upon customer acceptance of the insurance terms as
evidenced by contract execution.
Sahara Nissan is charged back for a portion of the finance fees and insurance
commissions when the customer terminates the finance contract prior to its
scheduled maturity. The estimated allowance for these chargebacks ("chargeback
allowance") is based upon the historical experience for prepayments or defaults
on the finance contracts. Finance fees and insurance commissions, net of
chargebacks, are classified as other operating revenue in the accompanying
statement of operations. See Note 8 for an analysis of the allowance for
estimated chargebacks.
EXTENDED WARRANTY CONTRACTS - Sahara Nissan sells extended service contracts on
new and used vehicles; these contracts generally provide extended warranty
coverage for periods of one
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
year or 12,000 miles, up to six years or 72,000 miles, whichever comes first.
The Company accounts for the sale of certain of these extended warranty
contracts in accordance with FASB 13 Technical Bulletin No. 90-1, "Accounting
for Separately Priced Extended Warranty and Product Maintenance Contracts,"
which requires that revenues from the sales of certain extended warranty
contracts be recognized ratably over the lives of the contracts. Costs
directly related to the sale of these contracts are deferred and charged to
expense proportionately as the revenues are recognized. Repair costs
associated with the warranty obligation are charged to expense as incurred.
The Company also sells extended service contracts on behalf of unrelated
third parties on which the Company recognizes commission revenue at the time
of the sale.
INVENTORIES - Vehicles are stated at the lower of cost or market, cost being
determined on the specific identification basis. Parts are stated at the lower
of cost or market, cost being determined on the first-in, first-out (FIFO)
basis.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the respective
lives of the assets. The ranges of estimated useful lives are as follows:
Furniture and fixtures 5 to 7 years
Machinery and equipment 5 to 10 years
Leasehold improvements Lesser of the life of the lease or asset
When depreciable assets are sold or retired, the related cost and accumulated
depreciation are removed from the accounts. Any gains or losses are included in
selling, general and administrative expenses. Major additions and betterments
are capitalized. Maintenance and repairs which do not materially improve or
extend the lives of the respective assets are charged to operating expenses as
incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets (i.e., property and
equipment) held and used by an entity are reviewed for impairment whenever
events or changes in circumstances indicate that the net book value of the asset
may not be recoverable. An impairment loss will be recognized if the sum of the
expected future cash flows (undiscounted and before interest) from the use of
the asset is less than the net book value of the asset. Generally, the amount
of the impairment loss is measured as the difference between the net book value
of the assets and the estimated fair value of the related assets. No impairment
losses have been incurred or recognized during the periods presented.
ADVERTISING AND PROMOTIONAL COSTS - Advertising and promotional costs are
expensed as incurred and are included in selling, general and administrative
expense in the accompanying statement of operations. Total advertising and
promotional expenses approximated $816,000 in 1996.
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
OTHER OPERATING REVENUE - Other operating revenue primarily consists of finance
fees, insurance commissions, sales for parts and service and revenue recognized
from extended warranty contracts.
FEDERAL INCOME TAXES - Sahara Nissan, Inc. is organized as a subchapter S
corporation under the Internal Revenue Code; therefore, the income earned by the
Company is reported on the personal tax returns of the stockholders.
Consequently, no provision for income taxes has been recorded in the
accompanying financial statements.
MANAGEMENT ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. The actual outcome associated with such
estimates could differ from the estimates made in the preparation of the
financial statements.
NOTE 2 - MAJOR SUPPLIERS AND FRANCHISE AGREEMENTS
The Company enters into agreements ("Dealer Agreements") with Nissan Motor
Corporation U.S.A. for the supply of its new vehicles and parts. Sahara
Nissan's overall sales could be adversely impacted by Nissan's inability or
unwillingness to supply the dealerships with an adequate supply of popular
models. The Company's Dealer Agreement renews annually. Management currently
believes that it will be able to continue to renew the Dealer Agreement;
however, there can be no assurance that such agreement will be renewed.
NOTE 3 - ACCOUNTS RECEIVABLE
The accounts receivable balances at December 31, 1996 are comprised of the
following (in thousands):
1996
----
Contracts in transit and vehicle receivables $2,245
Due from automakers 515
Trade and other 315
------
Total accounts receivable $3,075
------
------
Contracts in transit and vehicle receivables primarily represent receivables
from financial institutions and other regional banks which provide financing to
customer vehicle financing. These receivables are normally collected in less
than 30 days of the sale of the vehicle. Trade receivables primarily relate to
the sale of parts to commercial customers, as well as finance fees due from
financial institutions associated with vehicle financing provided to the
Company's customers. Amounts due from automakers primarily represent
receivables for parts and service work performed on vehicles pursuant to the
automakers' warranty coverage (principally, Nissan). Receivables from
automakers also include amounts due from automakers in connection with the
purchase of vehicles (including holdback and other credits) pursuant to the
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
dealership agreement; such amounts are generally remitted to Sahara Nissan on a
monthly or quarterly basis.
NOTE 4 - INVENTORIES
The inventory balance is comprised of the following (in thousands):
March 31, December 31,
1997 1996
--------- ------------
(unaudited)
New vehicles and demonstrators $7,705 $5,085
Used vehicles 1,072 1,548
Parts and accessories 446 404
------ ------
$9,223 $7,037
------ ------
------ ------
NOTE 5 - PROPERTY AND EQUIPMENT (IN THOUSANDS)
December 31,
1996
------------
Furniture and fixtures $ 185
Machinery and equipment 519
Capital lease 1,285
Leasehold improvements 623
------
2,612
Less: accumulated depreciation (940)
------
Total property and equipment $1,672
------
------
Depreciation expense during fiscal 1996 was $151,000.
The Company leases its dealership facility from its majority shareholder. The
noncancellable lease began on July 1, 1995 and expires in 2015. Monthly lease
payments are $36,500. The lease, excluding that portion associated with the
land (i.e., buildings and improvements), has been accounted for as a capital
lease in the accompanying financial statements. As of December 31, 1996, the
minimum future lease commitments associated with the buildings and
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
improvements portion of this lease are as follows (in thousands):
1997 $ 224
1998 224
1999 224
2000 224
2001 224
Thereafter 3,024
-------
4,144
Less: amount representing interest (2,898)
-------
Capital lease obligation $ 1,246
-------
-------
The remainder of the lease payments associated with the land portion of the
lease are $214,000 per year. See operating lease commitments in Note 10.
The property recorded under capital lease has a gross carrying value of
$1,276,000 with accumulated depreciation of $96,000 as of December 31, 1996.
For the year ending December 31, 1996, the Company recorded $64,000 in
depreciation expense in connection with the leased property. The Company is also
liable for all utilities, insurance and maintenance expense.
NOTE 6 - FLOOR PLAN NOTES PAYABLE
The Company finances its new and used vehicle purchases through a certain
commercial bank under a floor plan line of credit. Floor plan notes payable
bear interest at the finance company's prime rate plus 1% (approximately 9.0% at
December 31, 1996). The notes are collateralized by all of Sahara Nissan's
tangible and intangible personal property, including, but not limited to,
substantially all new, used and demonstrator vehicles, parts and accessories
inventory, accounts receivable, and machinery and equipment. The notes are
generally due within ten days of the sale of the vehicles or within three days
after receiving the sales proceeds, whichever is sooner and accordingly, have
been classified as current in the accompanying balance sheets.
Sahara Nissan also has a line of credit with its shareholders. Outstanding
balances under the line of credit are payable on demand. The line may be
withdrawn at the shareholders' options and is guaranteed by the Company's new
and used vehicles (subordinated to the rights of the bank). At December 31,
1996, the outstanding balance under this line of credit was $3,390,000. For the
period ending December 31, 1996, the Company paid $314,000 in interest to its
shareholders on the line of credit. The line of credit bears interest at a rate
established by the shareholder/lender which is generally based on the Company's
floor plan interest rate. At December 31, 1996, the rate was 9.25%. At March
31, 1997, the balance outstanding on this line of credit was $3,625,000
(unaudited) and the interest rate was 9.5%.
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7 - ACCRUED EXPENSES AND OTHER LIABILITIES (IN THOUSANDS)
1996
------
Payroll and bonuses $ 35
Chargeback allowance 226
Sales tax 111
Third-party warranty reserve 87
Other 123
-----
$ 582
-----
-----
NOTE 8 - PROVISION FOR FINANCE AND INSURANCE COMMISSION CHARGEBACKS
Presented below is the change in the allowance for estimated finance and
insurance chargebacks for the fiscal year 1996 (in thousands):
1996
------
Chargeback allowance at January 1 $ 167
Provision 190
Actual chargebacks (131)
-----
Chargeback allowance at December 31 $ 226
-----
-----
NOTE 9 - CONCENTRATIONS OF CREDIT RISK AND OTHER RISKS AND
UNCERTAINTIES
Financial instruments, which potentially subject Sahara Nissan to concentration
of credit risk, consist principally of cash, cash equivalents and accounts
receivable. Sahara Nissan had no credit losses on its cash or cash equivalents
during the periods presented.
Concentrations of credit risk with respect to customer receivables are limited
primarily to automakers and certain financial institutions. Credit risk arising
from receivables from commercial customers is minimal due to the large number of
customers comprising Sahara Nissan's customer base; however, they are
concentrated in Sahara Nissan's market area, Las Vegas. Because the Company's
vehicle and other sales are generated in the Las Vegas area, a severe economic
downturn could negatively impact the Company's operating results.
The Company receives certain cash incentives from Nissan under various programs
based on models purchased and the sales volume of certain models. During 1996,
the Company recognized approximately $1,907,000 for factory incentives, which
has been recorded as a reduction of cost of sales. During the three months
ended March 31, 1997, the Company recognized $602,000 (unaudited) for factory
incentives. These incentive programs are provided at the discretion of the
manufacturer. Management expects the incentive programs to continue; however
there can be no assurance that the incentive programs will continue the same
extent.
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
As discussed in note 2, the Company purchases its new vehicles and certain parts
and accessories from Nissan. Many of the vehicles, components of other vehicles
and certain parts are sourced from Japan; the cost of such inventory is impacted
by changes in the exchange rate between the United States dollar and the
Japanese yen. A significant weakening of the dollar against the yen could
increase the Company's cost of inventory.
From time to time, Sahara Nissan is named in claims involving the manufacture
and selling of automobiles, contractual disputes and other matters arising in
the ordinary course of business. Currently, no legal proceedings are pending
against or involve Sahara Nissan that, in the opinion of management, could be
expected to have a material adverse effect on the financial condition or results
of operations of Sahara Nissan in the year of ultimate resolution.
Sahara Nissan is also subject to federal and state environmental regulations,
including rules relating to air and water pollution and the storage and disposal
of gasoline, oil and other chemicals and waste. Local, state and federal
regulations also affect automobile dealership advertising, sales, service and
financing activities. Sahara Nissan believes that it complies with all
applicable laws relating to its business.
NOTE 10 - COMMITMENTS
The Company leases, under operating leases, certain dealership facilities,
computer equipment and storage facilities. Rent expense on all operating leases
approximated $213,984 for the year ended December 31, 1996. Future aggregate
minimum rental commitments for noncancellable operating leases, including the
land portion of the dealership facility lease (see Note 5), are as follows (in
thousands):
1997 $ 245
1998 218
1999 214
2000 214
2001 214
Thereafter 3,959
------
$5,064
------
------
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company leases the property from one of its shareholders. See Note 5. The
Company also has a line of credit with its shareholders. See Note 6.
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<PAGE>
SAHARA NISSAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12 - SUBSEQUENT EVENTS
The stockholders of Sahara Nissan executed a purchase and sale agreement dated
February 28, 1997, whereby the stockholders agreed to sell all of the stock in
Sahara Nissan to Cross-Continent Auto Retailers, Inc. ("C-CAR"). The purchase
price consists of cash consideration of $9 million, 125,984 shares of C-CAR
common stock and a five-year, $600,000 note bearing interest at prime, payable
monthly with the principal payable in full on February 28, 2002. The
transaction is scheduled to close in July 1997.
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<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 1996 and for the three months ended March 31,
1997 reflect the Company's pro forma statements of operation, as previously
filed, adjusted to give pro forma effect to the July 1997 acquisition of
Sahara Nissan, Inc. ("Sahara Nissan") as if such events had occurred at the
beginning of each period presented.
On a Form 8-K/A dated June 1997, the Company filed pro forma consolidated
financial statements for the year ended December 31, 1996 and the three
months ended March 31, 1997 reflecting the historical accounts of the
Company adjusted to give effect to: (a) the Company's 1996 reorganization
in June 1996 and initial public offering in September 1996 when the Company
sold 3,675,000 shares of its common stock to the public (the "Offering");
(b) the October 1996 acquisition of Hickey Dodge; (c) the April 1997
acquisition of Toyota West Sales and Service, Inc. and Douglas Toyota, Inc.
(collectively, "Spedding Toyota"). Such pro forma statements are included
elsewhere in this Form 8-K/A and are the starting point for the pro forma
condensed consolidated statements presented below.
The following unaudited pro forma consolidated balance sheet as of March
31, 1997 reflects the Company's pro forma balance sheet, as previously
filed, adjusted to give pro forma effect to the July 1997 acquisition of
Sahara Nissan as if it had occurred as of March 31, 1997.
The pro forma consolidated financial data and accompanying notes should be
read in conjunction with the Company's Consolidated Financial Statements
and the related notes as filed with its 1996 Annual Report on Form 10-K and
March 31, 1997 Quarterly Report on Form 10-Q, and the financial statements
and related notes of Sahara Nissan, which are included elsewhere in this
Form 8-K. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The pro forma consolidated financial data is provided for
information purposes only an should not be construed to be indicative of
the Company's financial condition or results of operations had the
transactions and events described above been consummated on the dates
assumed and are not intended to project the Company's financial condition
on any future date or results of operations for any future period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
Pro Forma Actual
as previously Sahara Pro Forma
filed (1) Nissan (2) Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Vehicle sales $557,165 $56,756 $613,921
Other operating revenue 70,629 6,979 77,608
-------- ------- ------- --------
Total revenues 627,794 63,735 - 691,529
Cost of sales 525,765 53,904 579,669
-------- ------- ------- --------
Gross profit 102,029 9,831 - 111,860
-------- ------- ------- --------
Expenses:
SG&A 73,846 6,246 (61)(3) 80,031
Depreciation and amortization 3,102 151 344 (4) 3,597
Employee stock compensation 1,099 - 1,099
-------- ------- ------- --------
78,047 6,397 283 84,727
-------- ------- ------- --------
Income before interest and taxes 23,982 3,434 (283) 27,133
Other income (expenses)
Interest income 1,358 - 1,358
Interest expense (8,208) (904) (768)(5) (9,880)
-------- ------- ------- --------
Income before taxes 17,132 2,530 (1,051) 18,611
Income tax provisions 6,795 - 518 (6) 7,313
-------- ------- ------- --------
Net income $ 10,337 $ 2,530 $(1,569) $ 11,298
-------- ------- ------- --------
-------- ------- ------- --------
Net income per share $ 0.73 $ 0.79 (7)
Weighted average shares outstanding 14,080 14,206 (7)
</TABLE>
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<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
Pro Forma Actual
as previously Sahara Pro Forma
filed (1) Nissan (2) Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Vehicle sales $122,292 $13,656 $135,948
Other operating revenue 16,930 1,644 18,574
-------- ------- ----- -------
Total revenues 139,222 15,300 - 154,522
Cost of sales 114,978 12,936 127,914
-------- ------- ----- -------
Gross profit 24,244 2,364 - 26,608
Expenses:
SG&A 17,862 1,714 (19) (3) 19,557
Depreciation and amortization 753 35 86 (4) 874
-------- ------- ----- -------
18,615 1,749 67 20,431
-------- ------- ----- -------
Income before interest and taxes 5,629 615 (67) 6,177
Other income (expenses)
Interest income 555 - 555
Interest expense (2,070) (288) (192) (5) (2,550)
-------- ------- ----- -------
Income before taxes 4,114 327 (259) 4,182
Income tax provision 1,537 24 (6) 1,561
-------- ------- ----- -------
Net income $ 2,577 $ 327 $(283) $ 2,621
-------- ------- ----- -------
-------- ------- ----- -------
Net income per share $ 0.18 $ 0.18 (7)
Weighted average shares outstanding 14,080 14,206 (7)
</TABLE>
-18-
<PAGE>
FOOTNOTES
- ---------
(1) See the pro forma statements as previously filed in June 1997
elsewhere in this Form 8-K.
(2) Reflects the actual results of operations of Sahara Nissan for the
year ended December 31, 1996 and the three months ended March 31,
1997.
(3) Reflects the Company's estimate of net additions and reductions to
selling, general and administrative expenses which would have occurred
if Sahara Nissan had been purchased at the beginning of 1996 and
consists of (a) an increase in rent expense associated with a facility
lease signed upon closing of the acquisition, (b) an elimination of
previous owners' compensation, and (c) an increase in compensation
pursuant to the new city manager's compensation arrangements. The
additional/reduced expenses include:
Three Months
Year Ended Ended
December 31, March 31,
1996 1997
---- ----
Rent $ 84 $ 21
Previous Owners' compensation (369) (69)
City manager's compensation 224 29
----- ----
$ (61) $(19)
----- ----
----- ----
(4) Reflects additional amortization associated with intangible assets of
approximately $12.0 million resulting from the purchase of the Sahara
Nissan dealership. The intangible assets, primarily goodwill,
generally having a life of 40 years.
(5) Reflects the estimated increase in interest expense, using 8.25%,
associated with the total borrowing of $13.2 million associated with
the purchase of Sahara Nissan ($9 million bank borrowings and $600,000
in seller financed debt, and $3.6 million in assumed debt).
(6) Reflects the estimated income tax effect of the adjustments described
in footnotes (2) to (4) above and for Sahara Nissan as if it were a
taxable entity, using an incremental tax rate of 37.4%.
(7) Net income per share data was not presented in the actual statement of
operations for the year ended December 31, 1996 as the historical
capital structure prior to the Company's reorganization and initial
public offering is not comparable with the capital structure
subsequent to these events. The pro forma net income per share was
calculated assuming that 14,205,704 shares were outstanding from the
beginning of each period presented, representing the 13,800,000 actual
shares outstanding plus 279,720 and 125,984 shares issued in
connection with the acquisition of Spedding Toyota and Sahara Nissan,
respectively.
-19-
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
Pro Forma
as previously Pro Forma
filed (1) Adjustments Pro Forma
--------- ----------- ---------
Current assets:
Cash and cash equivalents $ 15,867 $(2,900) (3) $ 12,967
Accounts receivable 23,504 2,009 (3) 25,513
Inventories 64,173 9,223 (3) 73,396
Prepaid assets 11 (3) 11
-------- ------- --------
Total current assets 103,544 8,343 111,887
-------- ------- --------
Property and equipment, net 21,840 1,615 (3) 23,455
Goodwill and other intangibles, net 57,368 12,045 (3) 69,413
Other assets 4,627 21 (3) 4,648
-------- ------- --------
Total assets $187,379 $22,024 $209,403
-------- ------- --------
-------- ------- --------
Liabilities:
Floorplan notes payable $ 52,528 $ 7,638 (3) $ 60,166
Current maturities of
long-term debt 8,845 200 (2)(3) 9,045
Accounts payable 8,888 281 (3) 9,169
Due to affiliates 12,310 12,310
Accrued expenses and other
liabilities 12,936 873 (3) 13,809
Deferred income taxes 1,327 1,327
-------- ------- --------
Total current liabilities 96,834 8,992 105,826
-------- ------- --------
Long-term debt 23,551 11,032 (2) 34,583
Deferred warranty revenue - long-term
portion 1,615 1,615
-------- ------- --------
Total long-term liabilities 25,166 11,032 36,198
-------- ------- --------
Stockholders' equity:
Preferred stock
Common stock 141 1 (2) 142
Paid-in capital 52,473 1,999 (2) 54,472
Retained earnings 12,765 12,765
-------- ------- --------
Total stockholders' equity 65,379 2,000 67,379
-------- ------- --------
Total liabilities and
stockholders' equity $187,379 $22,024 $209,403
-------- ------- --------
-------- ------- --------
-20-
<PAGE>
FOOTNOTES
- ---------
(1) See the pro forma statements as previously filed in June 1997
elsewhere in this Form 8-K.
(2) Reflects the purchase price of Sahara Nissan dealership consisting of
the following: $12.225 million cash, 9 million of which was financed
with bank debt, promissory notes payable to the seller in the amount
of $600,000 which mature in 2002, 125,983 shares valued at
approximately $2 million ($15.88 per share).
(3) Reflects the estimated allocation of the Sahara Nissan purchase price
based on the estimated fair value of the assets and liabilities
acquired. The purchase price allocation consists of the following (in
thousands):
Working capital $ 2,408
Fixed and other assets 372
Intangible assets, principally goodwill 12,045
-------
$14,825
-------
-------
-21-
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONSOLIDATED FINANCIAL DATA (AS PREVIOUSLY FILED IN JUNE 1997)
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 1996 and for the three months ended March 31,
1997 reflect the historical accounts of the Company for those periods,
adjusted to give pro forma effect to: (a) the Company's 1996 reorganization
in June 1996 and initial public offering in September 1996 when the Company
sold 3,675,000 shares of its common stock to the public (the "Offering"); (b)
the October 1996 acquisition of Hickey Dodge; and (c) the April 1997
acquisition of Toyota West Sales and Service, Inc. and Douglas Toyota, Inc.
(collectively, "Spedding Toyota") as if such events had occurred at the
beginning of each period presented.
The following unaudited pro forma consolidated balance sheet as of March 31,
1997 reflects the historical accounts of the Company as of that date adjusted
to give pro forma effect to the pending acquisition of Spedding Toyota as if
it had occurred as of March 31, 1997.
The pro forma consolidated financial data and accompanying notes should be
read in conjunction with the Company's Consolidated Financial Statements and
the related notes as filed with its 1996 Annual Report on Form 10-K and March
31, 1997 Quarterly Report on Form 10-Q, and the financial statements and
related notes of Spedding Toyota, which are included elsewhere in this Form
8-K. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The pro forma consolidated financial data is provided for
information purposes only an should not be construed to be indicative of the
Company's financial condition or results of operations had the transactions
and events described above been consummated on the dates assumed and are not
intended to project the Company's financial condition on any future date or
results of operations for any future period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
Actual Pro Forma Actual
Actual Hickey Pro Forma for 1996 Spedding Pro Forma
Company 1 Dodge 1 Adjustments Transactions Toyota 1 Adjustments Pro Forma
--------- ------- ----------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Vehicle sales $283,977 $ 89,550 $ - $373,527 $183,638 $ - $557,165
Other operating revenue 37,606 10,697 - 48,303 21,345 981 5 70,629
-------- -------- ------- -------- -------- ------- -------
Total revenues 321,583 100,247 - 421,830 204,983 981 627,794
Cost of sales
Gross profit 271,650 84,978 - 356,628 169,137 - 525,765
-------- -------- ------- -------- -------- ------- -------
49,933 15,269 - 65,202 35,846 981 102,029
-------- -------- ------- -------- -------- ------- -------
Expenses:
SG&A 36,490 10,285 847 2 47,622 26,344 (120) 6 73,846
Depreciation and
amortization 1,207 182 240 3 1,629 393 1,080 7 3,102
Employee stock
compensation 1,099 - - 1,099 - - 1,099
-------- -------- ------- -------- -------- ------- -------
38,796 10,467 1,087 50,350 26,737 960 78,047
-------- -------- ------- -------- -------- ------- -------
Income before interest
and taxes 11,137 4,802 (1,087) 14,852 9,109 21 23,982
Other income (expense)
Interest income 1,585 543 - 2,128 679 (1,449) 8 1,358
Interest expense (4,778) (1,390) 1,500 2 (4,668) (1,849) (1,691) 8 (8,208)
-------- -------- ------- -------- -------- ------- -------
Income before taxes 7,944 3,955 413 12,312 7,939 (3,119) 17,132
Income tax provision 3,362 - 1,630 4 4,992 - 1,803 9 6,795
-------- -------- ------- -------- -------- ------- -------
Net income $ 4,582 $ 3,955 $(1,217) $ 7,320 $ 7,939 $(4,922) $10,337
-------- -------- ------- -------- -------- ------- -------
-------- -------- ------- -------- -------- ------- -------
Net income per share $ 0.73 10
Weighted average shares outstanding 14,080 10
</TABLE>
-22-
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
ACTUAL
ACTUAL SPEDDING PRO FORMA PRO
COMPANY 1 TOYOTA 1 ADJUSTMENTS FORMA
--------- -------- ----------- -----
<S> <C> <C> <C> <C>
Revenues
Vehicle sales $77,554 $44,738 $ - $122,292
Other operating 11,468 5,285 177 5 16,930
------- ------ ------- -------
Total revenues 89,022 50,023 177 139,222
Cost of sales 73,839 41,139 - 114,978
------- ------ ------- -------
Gross profit 15,183 8,884 177 24,244
------- ------ ------- -------
Expenses:
SG&A 10,901 6,991 (30) 6 17,862
Depreciation and
amortization 381 102 270 7 753
------- ------ ------- -------
11,282 7,093 240 18,615
------- ------ ------- -------
Income before interest
and taxes 3,901 1,791 (63) 5,629
Other income (expense)
Interest income 736 181 (362) 8 555
Interest expense (1,211) (436) (423) 8 (2,070)
------- ------ ------- -------
Income before taxes 3,426 1,536 (848) 4,114
Income tax provision 1,280 - 257 9 1,537
------- ------ ------- -------
Net income $ 2,146 $1,536 $(1,105) $ 2,577
------- ------ ------- -------
------- ------ ------- -------
Net income per share $ 0.16 $ 0.18 10
Weighted average shares
outstanding 13,800 14,080 10
</TABLE>
-23-
<PAGE>
FOOTNOTES
- ---------
(1) Actual results of operations reflect the results of operations of
the Company for the year ended December 31, 1996 and the three
months ended March 31, 1997, of Hickey Dodge for the nine months
ended September 30, 1996 and of Spedding Toyota for the year ended
December 31, 1996 and the three months ended March 31, 1997, as
applicable.
(2) Reflects the Company's estimate of the net additions to selling,
general and administrative expenses and reductions in interest
expense which would have occurred if the Offering had been effected
as of the beginning of 1996 and consists of (a) a net increase in
management compensation pursuant to new compensation arrangements
to be in place subsequent to the Offering, (b) an increase in
administrative expenses associated with public ownership of the
Company's Common Stock, and (c) a net reduction in interest
expense reflecting estimated initial public offering proceeds used
to pay down floor plan debt. The additional expenses include:
Year Ended
December 31, 1996
-----------------
Management compensation $322
Legal and professional 225
Shareholder relations 188
Other 112
----
$847
----
----
(3) Reflects additional amortization associated with intangible assets
of approximately $14.9 million (principally goodwill) resulting
from the acquisition of Hickey Dodge, offset by a reduction in
depreciation expense associated with certain assets excluded from
the Hickey Dodge purchase.
(4) Reflects the estimated income tax effect of adjustments (2) and (3)
described above and the results of operations of Hickey Dodge as if
it were a taxable entity for the nine months ended September 30,
1996.
(5) Reflects the fact that as a result of the purchase transaction, the
Spedding dealerships will no longer utilize Automotive Assistance
Corp. ("AAC"), a related party with respect to Spedding Toyota, as
an intermediary in connection with the sale of warranty
transactions (see Note 11 to the combined financial statements of
Spedding Toyota, which are included elsewhere in this document).
(6) Reflects the fact that as a result of the purchase transaction,
Douglas Toyota, Inc. obtained a direct, five-year lease from the
facility owner instead of subleasing the property from RDS, Inc., a
related party with respect to Spedding Toyota (see Note 10 to the
combined financial statements of Spedding Toyota).
(7) Reflects additional amortization associated with intangible assets
of approximately $35.4 million resulting from the purchase of the
Spedding Toyota dealerships. The intangible assets, primarily
goodwill, have lives ranging from 10 to 40 years.
(8) Reflects the estimated reduction in interest income and increase in
interest expense, using 8.25% for both, based on the net cash
payment of $17.6 million and total borrowings of $20.5 million
associated with the purchase of Spedding Toyota ($7 million seller
financed debt and $6 million in bank borrowings, both associated
with the purchase of the dealerships, and $7.5 million seller
financed debt related to the land purchase).
(9) Reflects the estimated income tax effect of the adjustments
described in footnotes (5) to (8) above and for Spedding Toyota as
if it were a taxable entity, using an incremental tax rate of
37.4%.
(10) Net income per share data was not presented in the actual statement
of operations for the year ended December 31, 1996 as the
historical capital structure prior to the Company's reorganization
and initial public offering is not comparable with the capital
structure subsequent to these events. The pro forma net income per
share was calculated assuming that 14,079,720 shares were
outstanding from the beginning of each period presented,
representing the 13,800,000 actual shares outstanding plus the
279,720 shares issued in connection with the acquisition of
Spedding Toyota.
-24-
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
<TABLE>
ACTUAL PRO FORMA PRO
C-CAR ADJUSTMENTS FORMA
----- ----------- -----
(dollars in thousands)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 33,431 $(17,564) 1,2 $ 15,867
Accounts receivable 15,122 8,382 2,3 23,504
Inventories 45,800 18,373 2 64,173
-------- -------- --------
Total current assets 94,353 9,191 103,544
-------- -------- --------
Property and equipment, net 13,854 7,986 2,4 21,840
Goodwill and other intangibles, net 22,002 35,366 2 57,368
Other assets 4,144 483 2 4,627
-------- -------- --------
Total assets $134,353 $ 53,026 $187,379
-------- -------- --------
-------- -------- --------
Liabilities:
Floorplan notes payable $ 38,065 $ 14,463 2 $ 52,528
Current maturities of long-term debt 1,345 7,500 4 8,845
Accounts payable 6,620 2,268 2 8,888
Due to affiliates 5,405 6,905 2 12,310
Accrued expenses and other liabilities 8,446 4,490 2,3 12,936
Deferred income taxes 1,927 (600) 5 1,327
-------- -------- --------
Total current liabilities 61,808 35,026 96,834
-------- -------- --------
Long-term debt 10,551 13,000 1 23,551
Deferred warranty revenue - long-term portion 1,615 - 1,615
-------- -------- --------
Total long-term liabilities 12,166 13,000 25,166
-------- -------- --------
Stockholders' equity:
Preferred stock - -
Common stock 138 3 1 141
Paid-in capital 47,476 4,997 1 52,473
Retained earnings 12,765 - 12,765
-------- -------- --------
Total stockholders' equity 60,379 5,000 65,379
-------- -------- --------
Total liabilities and stockholders'
equity $134,353 $ 53,026 $187,379
-------- -------- --------
-------- -------- --------
</TABLE>
-25-
<PAGE>
FOOTNOTES:
- ----------
(1) Reflects the purchase price of the Spedding Toyota dealerships
consisting of the following: $28.1 million cash, $6 million of which
was financed with bank debt maturing in 2000; 279,720 shares valued at
$17.875 per share; and a prime rate based promissory note in the
amount of $7 million which matures in 2002.
(2) Reflects the estimated allocation of the Spedding Toyota purchase
price based on the estimated fair value of the assets and liabilities
acquired. The purchase price allocation consists of the following (in
thousands):
Working capital $ 3,730
Fixed and other assets 969
Intangible assets, including goodwill 35,366
-------
$40,065
-------
-------
(3) Reflects management's estimate of the future cost of approximately
$800,000 expected to be incurred in connection with in-house warranty
contracts outstanding at the time of acquisition with a corresponding
receivable reflecting the reimbursement agreement with the seller.
(4) Reflects the purchase of land in anticipation of relocating both of
the Spedding Toyota dealerships. The purchase price of such land was
$7.5 million, which was financed with a prime rate based note which
matures in October 1997.
(5) Reflects reduction in deferred tax liabilities associated with the
differences between the book and tax bases of assets acquired and
liabilities assumed.
-26-
